January 23, 2009

The "Five To One" recession rule of sales

Stanley Marcus Jr. had a great mind for both customer service and sales. 

In late 2000, as the dotcom bubble started to burst and advertisers started to cut budgets, I talked with Mr. Marcus about our sales challenges. He offered me a simple rule of thumb that changed my outlook (and later my sales life).  

Call it the Five To One rule of prospecting and sales. Simply put, if your market is cut back by 10%, you'll have to work 50% harder (five times market contraction) to achieve the same level of sales you did when the market was strong. 

In 2001, the ad market shrunk over 20%, and I applied Mr. Marcus's rule to my sales life -- and increased my efforts by 100%. Surprisingly, my production in 2001 was a few points higher than 2000. I preached this rule to several of my fellow Yahoo!'s and those that took it preserved their year-over-year success. 

Here's the point: When there's a recession, the market doesn't completely disappear, it shrinks. The scarcity mindset may tell you that there's no more business to be had, but that's not true. There's just less of it. You'll have to look harder to find prospects or customers with budget. When you find them, you'll have to work harder to win their business as your competitors discount themselves to death. 

Before you write off 2009, apply the Five To One rule to your market/industry. In the end, you'll realize that you are still in control of your sales destiny -- if you're willing to work harder this year. 

If you haven't seen it already, check out The Mr. Marcus Story on YouTube. 

Posted at 12:24 PM in Business Effectiveness  |  Permalink  |  Comments (3)  |  TrackBack (0)

Comments

Commentor

Great post and great video Tim! Now, more than ever, a salesperson's success is determined by their desire to control their own destiny and do what it takes to be successful. Your "five to one" rule is a great suggestion for doing just that. Thanks for sharing!

I've featured your post in my weekly Rainmaker 'Fab Five' blog picks of the week (found here: http://www.maximizepossibility.com/employee_retention/2009/01/the-rainmaker-fab-five-blog-picks-of-the-week-1.html) so that my readers might benefit from this powerful post.

Be well!

Posted by: "Chris Young, The Rainmaker"  |  January 26, 2009 at 10:09 AM

Commentor

Hello Jason --

I'm not advocating a 500% increase in calls. I'm saying that for every 1% your product/service market shrinks, you increase efforts by 5%. If, as in my case, the market shrank by 20%, then I need to do 100% more -- which is realistic but dang hard. But that's survival. You are looking for hard to find money now, which means the job is harder now in the prospecting phase, rather than the close phase, etc.

PS -- not just calls need to increase, focus, effort, cunning and force need to jump up too.

Posted by: Tim Sanders  |  January 23, 2009 at 04:51 PM

Commentor

@jasondtaylor

Tim, love your writing and followed the blog since it started (almost)
I appreciate the post here but break this out a bit. If I simple multiply my sales calls by a factor of 5 I quickly get to a unrealistic # of calls per day which means I can't just blankly increase calls, there's a law of diminishing returns in effect? Where do you recommend we focus the bulk of the "Power of 5 Effect?"

Posted by: Jason Taylor  |  January 23, 2009 at 02:03 PM

Post a comment

If you have a TypeKey or TypePad account, please Sign In